- For the past three decades care has been moving out of hospitals into peoples’ homes
- This is a significant and rapidly growing shift positioned to accelerate over the next decade
- Driving this change are significant structural, organizational, and social factors
- An early wave of new entrant digital ‘pure plays’ started to take advantage of this move ~3 decades ago and developed innovative software health solutions and services for people to consume in their homes
- Later, there followed a second wave, comprised of several giant diversified healthcare companies that created and marketed digital home health offerings
- The majority of traditional MedTechs have not responded to this shift and continue to produce physical devices for episodic surgical interventions in hospital operating rooms
- Could their failure to develop software solutions for care in the home be an obstacle to their future growth and competitive advantage?
Out of the hospital into the home A bridge too far or one that traditional MedTechs must cross?
On 30th January 2023, England's state funded National Health Service (NHS) announced a two-year recovery plan to help restore emergency care and frontline services. The plan, backed by a £1bn (US$1.2bn) fund, will increase virtual hospitals where patients receive high-tech care in their homes. It also includes 5,000 new hospital beds that will boost capacity by 5%, and 800 new ambulances, which will increase the fleet by 10%. Currently, England has ~7,000 virtual ward beds in the community. By 2024, ~50,000 patients a month are expected to benefit from these, which shall provide care mostly for elderly patients with chronic lifetime conditions. NHS virtual hospitals will be supported by a range of wearables and medical devices to diagnose and monitor patients’ conditions and share the data with their physicians in real time. This is not a new phenomenon; in 2006, China responded to its shortage of health professionals by developing virtual (internet) hospitals, and by mid-2021 there were >1,600 of them providing convenient and efficient medical services to millions of patients in their homes. The UK government’s NHS recovery plan is a response to a series of strikes by health workers, protesting about staff shortages and deteriorating hospital conditions. Currently, there are >130,000 vacancies in the NHS; a vacancy rate of ~10%. Last December (2022), 54,000 people in England waited >12 hours for an emergency hospital admission. The figure was virtually zero before the pandemic. The average wait time for an ambulance to attend a stroke or heart attack in December 2022 was >1.5hrs, while the target is 18 minutes. In September 2022, >7m people in England were waiting to start NHS hospital treatments, which is the highest number since records began in August 2007. Surgeons were reported to being frustrated because operating rooms were not being used due to a lack of beds and staff. This is not simply a UK problem. Since December 2022, health workers in the US, and France have engaged in similar strikes to protest about deteriorating hospital conditions. According to the World Health Organization (WHO), such protests are manifestations of a global shortage of medical staff. “All countries face challenges in training, recruitment, and the distribution of health professionals”, says the WHO, and suggests that by 2030, the global shortage of medical staff will mount to ~15m. To the extent that a significant element of the challenges facing healthcare systems is staff shortages, it is not altogether clear how the British government’s recovery plan to increase NHS hospital beds and services will work if there is a dearth of health professionals.
In this Commentary
This Commentary suggests that the movement of care out of hospitals to peoples’ homes is not just a passing political response to a temporary crisis. The shift is driven by significant structural, organizational, and social factors, which we describe. Since the late 1980s these factors have been gaining momentum and are positioned to have a defining influence over the next decade. Two distinct ‘waves’ of medical technology companies have taken advantage of this shift. The first wave started ~3 decades ago with several digital ‘pure play’ new entrants, which included ResMed, Propeller Health, Teladoc Health, Livongo Health, and Masimo. These companies all developed and marketed software health solutions to be consumed by patients in their homes. Later, there followed a second wave, comprised of a few giant diversified healthcare companies that included Philips,Medtronic, and Johnson & Johnson, which successfully entered the digital home care market. Notwithstanding, the overwhelming majority of traditional MedTechs have not developed digital solutions and services for patients to consume in their homes. Is this “a bridge too far” for them, or a bridge they must cross if they want to increase their growth rates and competitiveness?
1st wave: digital pure plays
ResMed An early pure play that developed digital health solutions and services to be consumed by patients in their homes is ResMed, (an abbreviation of ‘respiratory medicine’), which started life in the late 1980s in Australia. In 1981, Colin Sullivan, a Professor of Medicine at the University of Sydney, developed and patented a continuous positive airway pressure (CPAP) device, which was the first successful non-invasive treatment for obstructive sleep apnea (OSA). Before Sullivan’s invention, the treatment for chronic OSA was a tracheostomy, where a hole is made through the neck into the trachea so breathing can bypass the nose and mouth. Initially, Sullivan partnered with Baxter, a US multinational medical technology company, to help commercialize his technology. In 1989, Baxter decided not to enter the sleep apnea market, and Peter Farrell, a Baxter executive, led a management buyout to acquire the technology and established ResMed in Australia. In 1990, the company relocated to San Diego, USA, and today, is a world leading software-driven, medical device enterprise, traded on the New York Stock Exchange (NYSE), with a market cap ~US$32.5bn, annual revenues ~US$3.6bn, >8,000 employees and a presence in >140 countries. Its main product offering, the AirView™ telehealth platform, is a secure, cloud-based system, which enables patients with sleep-disordered breathing and respiratory insufficiencies to be treated in the comfort of their own homes. The device provides real-time patient data, personalized insights, and proactive alerts that allow physicians to remotely monitor and connect to their patients. ResMed has >10m, cloud enabled, home care devices in the market and has accrued ~5bn nights of medical sleep and respiratory care data. Propeller Health In 2019, ResMed acquired Propeller Health for US$225m, but the company continued to operate as a standalone business. Founded in 2007, Propeller developed a mobile platform that offers sensors, mobile apps, analytics, and services to support respiratory health management. It is now a world leader in providing digital health solutions that keep patients with chronic obstructive pulmonary disease (COPD) and asthma out of hospital. The company’s sensors attach to patients’ inhalers and through its app, users can track their medication use, record their symptoms, receive environmental forecasts, which could affect their conditions, and download progress reports to share with their physicians. The app allows health providers to monitor their patients’ progress remotely, adjust treatment plans based on objective data and intervene when necessary. Propeller’s clinically validated solutions have found favour with US health insurers because they have demonstrated ~58% improvement in medication adherence, ~48% increase in symptom-free days, ~53% reduction in hospital visits and lowered costs of treating COPD, a condition that affects ~24m American adults and costs ~US$50bn to treat each year. In 2017, Fast Company named Propeller as one of the “most innovative companies”. In January 2019, the company launched ‘My Pharmacy’ with Walgreens as an in-app feature that allows users to manage their prescription refills for COPD and asthma and to locate a nearby pharmacy. The company quickly expanded this feature to CVS, Kroger, Rite-Aid and Walmart; five of the seven largest pharmaceutical providers in the US. Teladoc Health Another early digital pure play is Teladoc Health, an American enterprise founded 21 years ago to provide convenient home healthcare for those who have difficulty accessing traditional healthcare services. Initially, it provided telephone-based physician consultations and medical advice. In 2006, the company added a proprietary digital platform, which enabled patients to securely upload medical records, images, and notes and share them with their doctors. This allowed physicians to assess a patient’s medical information and provide appropriate treatment plans quickly and easily. Teladoc continued to expand its services, including the introduction of remote medical consultations and a suite of digital health tools. Today, the company is a multinational telemedicine and virtual healthcare corporation. Its offerings include virtual care services and digital health solutions, medical opinions, artificial intelligence (AI) and machine learning (ML) driven analytics, telehealth devices and licensable platform services. Its primary services, which have expansive clinical depth and breadth across >450 medical subspecialties, are available in 40 languages and 175 countries. Livongo Health In 2020, Teladoc acquired Livongo Health, another pure play, in a deal valued at US$18.5bn, which is the largest digital health transaction in history, and created a combined entity valued at ~US$38bn. Livongo was founded in 2008, with a mission “to make virtual care the first step on any healthcare journey”. In July 2019, the company successfully IPO’d and raised US$335m. Until its merger with Teladoc, Livongo traded on Nasdaq and reached a market cap of ~US$14bn. The company’s principal offering is a digital platform that collects data from connected devices, wearables, and mobile apps to provide users with personalized care plans, coaching, and support to help them accomplish their medical goals from the comfort of their homes. A joint statement from the two companies at the time of the merger said that the combination is expected, “to create substantial value across the healthcare ecosystem, enabling clients everywhere to offer high quality, personalized, technology-enabled longitudinal care that improves outcomes and lowers costs across the full spectrum of health".
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